Wal-Mart expected to report 3Q profit increase

Wal-Mart to report 3Q results that will offer clues on shopper mindset heading into holidays

NEW YORK (AP) -- Wal-Mart Stores Inc. is expected to show continued momentum in the company's U.S. namesake business when it reports third-quarter results on Thursday. That bodes well for the world's largest retailer as it heads into the crucial holiday shopping season.

WHAT TO WATCH FOR: Wal-Mart's results will be examined for signs about the mindset of shoppers, both here and abroad. Analysts will also want to get details of its holiday strategy to woo shoppers, which will likely put pressure on other rivals.

Wal-Mart has been able to turn around its business by fixing mistakes it made in merchandising and pricing. It's hammering its low price message again after temporarily discounting select items. It's also returned thousands of items to its shelves, after a campaign to reduce clutter in its stores backfired.

As a result, Wal-Mart is expected to report its fifth consecutive quarterly revenue gain at its namesake U.S. stores open at least a year. That sales figure is a measure of a retailer's health because it excludes results from locations that open and close during the year. Before turning in business around, Wal-Mart had reported nine straight quarters of declines in the figure — the longest streak in Wal-Mart's history.

Analysts expect Wal-Mart's namesake U.S. business to post an increase of 1.9 percent in revenue at stores open at least a year for the third quarter, according to FactSet. They expect a 2.1 percent increase for its entire U.S. business, including a 3.8 percent rise at Sam's Clubs.

Given a yo-yo economic recovery, investors will be looking for any signs of whether Wal-Mart's low-income shoppers who struggle with paying the bills are spending a little more. Analysts will specifically look for whether Wal-Mart shoppers are having a harder time or easier time stretching their dollars to the next payday. The company had said in August that it's seeing such financial pressures escalate for its shoppers abroad.

Investors will want to know how early holiday sales are faring. Wal-Mart executives told investors in October that its layaway program which was launched 30 days earlier than last year has helped boost the business. As of last month, it already had $400 million worth of layaway merchandise, half of last year's total season. Analysts will want an update on its layaway business.

Wal-Mart said last week it is offering sharper discounts and broader assortments for the holiday shopping season. It will start offering early bird specials at 8 p.m. on Thanksgiving Day, two hours earlier than a year ago. It's also guaranteeing shoppers that it will have three of the most popular items it sells if they line up inside the store during a one-hour event that day. Wal-Mart will have two more rounds of sales that will also include a consumer electronics sale at 10 p.m. and another sale at 5 a.m. on Friday

Investors also want an update on the company's investigation into allegations of bribery in its Mexico operations, which surfaced in late April. Wal-Mart has launched its own internal investigation into the matter and is working with government officials in the U.S. and Mexico. At the company's annual meeting in June, company officials pledged that they will get to the bottom of the allegations. It's also been overhauling its compliance program.

Still, investors, who pushed the stock down after the allegations surfaced in late April, have sent shares up 26 percent since mid-May. The company's stock has climbed 20 percent since the beginning of the year and is hovering around $72.

WHY IT MATTERS: Wal-Mart's results are considered a bellwether of consumer spending because the company draws nearly 10 percent of all non-automotive retail spending in the U.S.

WHAT'S EXPECTED: Analysts expect earnings of $1.07 per share on revenue of $114.9 billion, according to FactSet.